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TENTH ANNUAL REPOR1 



OF 



THE ONTARIO ENERGY BOARD 



YEAR ENDI 




EMBEK 31 1969 




ONTARIO 



TELEPHONE 
365-2851 



ONTARIO ENERGY BOARD 



790 BAY STREET 
TORONTO 2 



January 26, 1970. 



The Honourable George A. Kerr, Q.C, 
Minister of Energy & Resources Management, 
Parliament Buildings, 
Toronto, Ontario. 

S±r : 

I have the honour to present the Annual Report of 

the Ontario Energy Board for the calendar year 1969 

Respectfully submitted, 



1 C^-^f^-^ L> 
A. R. Crozier, 
Chairman. 




'ENTH ANNUAL REPORT 



OF 



THE ONTARIO ENERGY BOARD 



YEAR ENDING DECEMBER 31, 1969 



IK TROD I 1 CT I ON 

This report is s\ibmitted in accordance with section 
9 of The Ontario Energy Board Act, 1964, and it outlines the 
activities of the Board for the calendar year ending December 

31, 1969. 

The Ontario Energy Board acts under the authority 
of The Ontario Energy Board Act, 1964, references from the 
Minister of Energy and Resources Management pursuant to sections 
6 or 10 of The Energy Act, 1964, those sections of The Municipal 
Franchises Act that pertain to gas, and one section of The 
Assessment Act. 

COMPOSITION OF THE BOARD 

During the whole of the year under review, the 
Board consisted of Mr. A. R. Crozier, Chairman, Mr. A. B. 
Jackson and Mr. T. C. MacNabb, Vice Chairmen, and Mr. D. M. 
Treadgold, Q.C., part-time member. The principal members of 
the staff are the Secretary, two chartered accountants employed 
pursuant to Part Til of The Ontario Energy Board Act, 1964, 
as Energy Returns Officer and Deputy Energy Returns Officer, 
and the Board Engineer. 

FUNCTIONS OF THE BOARD 

The major functions of the Board are as follows: 

(a) Under The Ontario Energy Board Act, I964 : 

Approving and fixing the rates and charges for the sale, 
transmission, distribution and storage of gas in the 
Province. 

Ensuring compliance by gas companies with the Uniform 
System of Accounts for Gas Utilities. 



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Granting leave to construct transmission pipe lines, 
production lines, distribution lines and stations. 

Granting authority to expropriate land for pipe lines 
and stations. 

Recommending designation of lands as gas storage areas. 

Authorizing storage of gas in designated gas storage areas 

Requiring and regulating the joining of interests in gas 
or oil pools, and apportioning the benefits of operation 
therein. 

Hearing and reporting to the Lieutenant Governor in 
Council on proposals of gas companies to sell their 
systems, amalgamate with other companies, or acquire 
share control of other gas companies. 

Examining and reporting on any matters pertaining to 
energy referred to the Board by the Lieutenant Governor 
in Council. 

(b) Under The Energy Act, I964 : 

Examining and reporting on certain matters referred to the 
Board by the Minister of Energy and Resources Management. 

( c ) Under The Municipal Franchises Act : 

Approving terms and conditions of municipal gas franchise 
agreements. Granting Certificates of Public Convenience 
and Necessity for the supply of gas. 

(d) Under The Assessment Act : 

Determination of proper classification of pipe lines for 
assessment purposes, when classification as transmission 
lines is in dispute. 



LEGISLATION 

Several important amendments were made to The Ontario 
Energy Beard Act, I96if, by The Ontario Energy Board Amendment 
Act, I968-69. Section 19 was amended to give guide lines to 
the Board in determining the rate base of a gas company. A 
new section 25a was enacted requiring leave of the Lieutenant 



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Governor in Council, following a hearing and report by the 
Hoard, for certain sales of property, amalgamations and share 
acquisitions by gas companies. Also, a number of changes were 
made to complement The Expropriations Act, 1966-69. 

The Municipal Franchises Act was amended to give the 
Board power, in proper cases after a hearing, to provide for 
continuation of gas service when a municipal franchise expires 
and the parties are unable to agree on terms for renewal. 

BEARING STATISTICS 

During the year the Board held eighty-five hearings, 

including inquiries and meetings in the nature of hearings, 

classified as follows: 

The Ontario Energy Board Act. 1964 

Rates and other charges (Section 19) 34 

Leaves to construct transmission pipe lines 

(Section 37) 7 

Amendment of leave to construct transmission pipe 

line (Section 30) 1 

Expropriations for pipe lines (Section 40) 14 

Designation of gas storage area and authorization to 
store gas therein (Sections 21 and 35) 1 

Drilling of wells in designated gas storage areas 
(Section 23, referred by Minister) 3 

Leave for one gas company to acquire shares of 

another (Section 25a) 1 

The Municipal Franchises Act 

Terms and conditions of gas franchise agreements 

(Section 9) 16 

Certificates of Public Convenience and Necessity 

(Section 8) 8 



Total S 



r 



- k - 

GENERAL ADMINISTRATION 

In accordance with the usual practice, the Board held 
its hearings at locations most convenient for the applicants 
and other interested parties. Forty-five applications were 
heard in various communities outside Toronto. 

The Board held seventeen Board meetings as well as 
many pre-hearing conferences and other meetings during the year. 

The Chairman participated in the 1969 Conference of 
Canadian Public Utilities Commissioners which was held at Banff, 
Alberta, on June 18th, 19th, 20th and 21st. Representatives 
from nine of the provinces studied and discussed a number of 
important problems of rate regulation, including depreciation 
and income tax, cost analysis as an aid to rate-making, utility 
financing and diversification of operations, contributions in 
aid of construction and allowable rate of return. 

RATES 

During the year the Board dealt with thirty-four 
applications for the fixing and approving of rates and other 
charges for the sale of gas. About half of these applications 
were for the initiation or continuation of interim rates pend- 
ing a final determination by the Board. The other applications 
were related to the extension of existing rates into areas 
being served for the first time and for rates covering the 
sale of large volumes of gas for industrial use. 



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Over one-half of all gas sales in the Province of 
Ontario is to industry and this percentage will increase in 
the future. Competition for the industrial energy market is 
keen but the gas utilities, assured of adequate gas supplies 
since the completion of the Great Lakes Gas Transmission 
Company project, have been successftilly negotiating with in- 
dustry for the sale of large volumes of gas. 

The rates charged by gas distributors in the Province 
did not increase during 19&9- Operating expenses and the 
cost of money have been increasing, however, and the companies 
have bean concerned about ways and means of controlling costs. 
Penalties for late payment of bills, already in effect in 
most areas in the Province, were established in the other 
areas. 

Public hearings on the rates charged by Northern 
and Central Gas Corporation, which had been planned for 1969, 
were postponed to 1970. In the meantime various studies have 
been undertaken in anticipation of the hearings, including a 
study by a Board consultant into the cost of money. 

APPROVALS AND CERTIFICATE:; 

During the year the Board approved the terms and 
conditions of sixteen franchise agreements negotiated by 
natural gas distributors with municipalities. Certificates 
of public convenience and necessity for the distribution of 
natural gas were granted by the Board to companies extending 



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gas service to the Town of Exeter, the Villages of Lucan, 
Centralia, Embro and Kensall and the Townships of Biddulph, 
KcGillivray, Stephen, Usborne, Hay, Paipoonge and Studholme. 

ACQUISITION OF PROPERTY OR SHARE CONTROL OF OPERATING GAS 

SYSTEMS 

Early in 1969, Northern and Central Gas Corporation 
Limited purchased substantially all the assets and took over 
the franchise and operations of Augusta Natural Gas Limited. 
The latter company was a wholly-owned subsidiary of Du Pont 
of Canada, Limited and its system served the plant of the 
parent company in the Township of Augusta and another large 
industry in the same township. 

Northern and Central Gas Corporation Linited expects 
to obtain substantial advantages from the acquisition, mainly 
because of acquiring a favorable gas purchase contract and a 
large market for interruptible gas service. Following a hear- 
ing on May l<Vth, 1969, the Board issued a Certificate of Public 
Convenience and Necessity enabling Northern and Central Gas 
Corporation Limited to supply gas in the area previously served 
by Augusta Natural Gas Limited. 

Augusta Natural Gas Limited did not require leave 
under section 25a of The Ontario Energy Board Act, 1964, in 
order to sell its system, as that section was not enacted 
until October, 1969. The terms of purchase will, however, 
be reviewed by the Board in due course both as to accounting 
treatment and as to the effect on rates. 



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Late in September, 1969, The Consumers 1 Gas 
Company announced that it intended to make an offer to 
purchase common shares of Union Gas Company of Canada, 
Limited, and on. October 15th a formal offer was made. Cn 
October 31st, Royal Assent was given to The Ontario Energy 
Board Amendment Act, 1968-69, which enacted section 25a of 
The Ontario Energy Board Act, 1964. That section prohibits 
a purchase of shares of the kind proposed unless leave is 
obtained from the Lieutenant Governor in Council, and pro- 
vides that the application for leave is to be made to and 
heard by the Board, which reports with its opinion to the 
Lieutenant Governor in Council. An application for leave 
with respect to the outstanding offer was made to the 
Board on October 31st, but it was not possible to complete 
the hearing before December 15th, the expiry date of the 
offer, and the application was withdrawn on December 12th. 
A new offer was made to Union Gas shareholders on December 
15th, 1969, and a new application was made on the same date, 
which is to be heard by the Board early in 1970. 

For various reasons, including the size and public 
utility status of the two companies, the proposal has at- 
tracted a very considerable amount of public interest and 
will require careful examination by the Board before it re- 
ports to the LieiAtenant Governor in Council. 



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CONSTRUCTION OF PIPE LINES 

The Board heard and approved a number of applications 
for leave to construct gas transmission pipe lines. The major 
lines approved and constructed during the year were as follows: 

a) A k n Union Gas Company pipe line, 12 miles long, from the 
company f s facilities in the Township of London north to 
serve the communities of Lucan and Cent r alia, including the 
industrial park at Centralia. 

b) A further extension of the k n pipe line referred to above, 
a distance of k miles, to serve the Town of Exeter. 

c) A further extension of the k n pipe line referred to above, 

a distance of 7 miles, from Exeter to the Village of Hensall. 

d) A 12" Union Gas Company pipe line, 9 miles long, from the 
company's facilities in the Township of West Zorra to the 
Village of Beachville, and a 6" branch line lj miles long. 
These lines enable the company to supply large volumes of gas 
to a plant of Canada Cement Company Limited near Beachville. 

e) A 4" Consumers' Gas pipe line, & miles long, in the Township 
of Charlottenburgh, to serve the community of Summerstown. 
The immediate need for the line was to serve a small number 
of industrial customers but the gradual attraction of some 
residential load is also expected. 

f ) A k n pipe line, 7 miles long, constructed by Northern and 
Central Gas Corporation Limited to serve the armed forces 
base at Barriefield. This line had been approved by the 
Board in 1967 but was not constructed until 1969, after a 
route revision had been approved. 



- 9 - 

In addition to the above the Board approved, for 
construction in 1970, a 20 n Union Gas Company pipe line, 
19 miles long, within the Counties of Essex and Kent, being 
one of the stages in the looping of the Dawn-Windsor gas 
transmission line of the company. 

EXPROPRIATION HEARINGS 

After granting leave to construct and following a 
public hearing, the Board may authorize the owner of the pipe 
line to expropriate land for that purpose. During the year the 
Board held fourteen hearings to expropriate land for pipe lines 
and stations. The public hearings are usually held in the area 
affected, in order that the landowners may have the fullest 
opportunity to be heard. 

In authorizing expropriation, the Board is not em- 
powered to deal with compensation. In the past, compensation 
has been determined by a board of arbitration appointed by the 
Minister under The Ontario Energy Board Act, 1964. However, 
with the enactment of The Expropriations Act, 1968-69, and 
complementary amendments of The Ontario Energy Board Act, 1964, 
compensation is now determined by the Land Compensation Board 
created under The Expropriations Act, I968-69 or, pending 
appointment of that Board, by the Ontario Municipal Board. 

As in previous years, the Government again appointed 
a special inspector to act as liaison between the landowners 
and the pipe line company during construction and clean-up 
periods. This inspector also ensures compliance with any terms 

and conditions of Board orders related to the construction. 



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UNIFORM SYSTEM OF ACCOUNTS 

Further progress was made in 1969 towards full 
implementation of the prescribed Uniform System of Accounts. 
The Consumers ' Gas Company has in progress a very detailed 
review of its provisions for depreciation. In 1968 the 
Board issued Orders, pursuant to the Uniform System of Ac- 
counts, supporting the conversion of the Company's observed 
depreciation reserve applied to the 1955 redetermined plant 
values, to one based upon an estimated service life basis. 
During 1969 detailed accounting studies of certain post-1955 
property acquisitions were carried out and submissions made 
to the Board. A large amount of additional work remains to be 
done, however. 

Both Northern and Central Gas Corporation Limited 
and Union Gas Company of Canada, Limited reviewed depreciation 
during 1969, and the Board expects that the results in each 
case will be presented to it in 1970 for approval pursuant to 
the Uniform System of Accounts. Major changes in depreciation 
rates were put into effect in 1969 by Union Gas Company of 
Canada, Limited on an interim basis, but these are subject to 
review by the Board when the Company's study is completed. 

A number of other important accounting matters were 
before the Board in 1969 and will need further attention, 
including the accounting treatment of major property acquisi- 
tions and of deferred income taxes. 



- 11 - 

As in the past the staff of the Board will continue 
to work closely with the staffs of the Gas Utilities in order 
to expedite the full implementation of the Uniform System of 
Accounts for all Class n A n Gas Utilities. In the case of 
The Consumers' Gas Company, where some special problems re- 
quire attention, the Board has the assistance of McDonald, 
Currie & Co. as consultants, and has found this assistance 
very valuable. 

GAS STORAGE 

The storage pools of southwestern Ontario provide 
large volumes of gas to supplement pipe line supplies in the 
winter months and to replace pipe line supplies in emergencies, 
thus giving most gas customers in the Province assurance of 
uninterrupted service at reasonable cost. The year saw 
further development of these pools. 

Tecumseh Gas Storage Limited continued its program 
of increasing the input and output deliverability capacity 
of the Kimball-Colinville Pool. With the approval of the 
Minister upon the report of the Board, seven wells were drilled 
during the year. 

Regulations and Orders were made under The Ontario 
Energy Board Act, 196if, following hearings by the Board, 
which enabled Union Gas Company of Canada, Limited to enlarge 
the area of two of its pools, Dawn #V7-49 and Waubuno . In 
the result there was no additional storage of gas but, rather, 
better security of existing storage by means of enlargement 



- 12 - 

of the protective zones, shown to be necessary by recent 
technological developments and geological information. 

The Bickford and Sombra Pools in the County of 
Lambton, controlled by Imperial Oil Limited, are designated 
as gas storage areas but until recently were still producing 
gas. Imperial Oil Limited and Union Gas Company of Canada, 
Limited, have entered into a "joint venture" agreement for 
the development of the Pools for gas storage and, during 1969, 
applied to the Board for the various approvals under The 
Ontario Energy Board Act, 196k, that are necessary in order 
to give effect to their plans. The proposed development is 
opposed by The Consumers' Gas Company, which questions the 
need for additional storage facilities at this time. That 
company is proposing to acquire share control of Union Gas 
Company and consequently, although a hearing by the Board 
was commenced on September 16th, 1969, at which most of the 
evidence of the applicants was received, it has since been 
adjourned to early 1970. 

The needs in the eastern part of the Province 
prompted The Consumers* Gas Company to do preliminary work 
in assessing the potential for gas storage of an aquifer 
at Russell, near Ottawa. A temporary transmission line to 
carry gas for test injection was constructed, on terms speci- 
fied by the Board. The tests made during 1969 proved somewhat 
disappointing, but further tests are now proposed. Accordingly, 
the use of the temporary line for a further year was authorized 
by the Board. 



Ontario Energy Board 
1969 Annual Report 



5RARY